CGAP: Why an Open Payments Infrastructure Matters for Financial Inclusion

May 1, 2015 | Chloe Hunt

In a new blog post for The Consultative Group to Assist the Poor, Ripple Labs business development team members Daniel Aranda and Ryan Zagone discussed how an open infrastructure can support the world’s underserved populations by fostering innovation and growth in the payment sector.

The CGAP is a global partnership that seeks to advance financial inclusion around the world to improve the lives of the poor.

While the financial services sector has begun adopting open protocols to enable interconnectivity (e.g. between trading desks), the payments sector has yet to adopt a fully open settlement protocol to enable global connectivity, leaving networks siloed and lacking interoperability. This is often true for networks within countries (or within a single currency region), and almost always true for networks that exist across geographic (or currency) borders.

For many, low-value cross-network payment transactions are prohibitively expensive, delayed and in some cases simply not possible. It’s becoming more apparent that “payment systems need to evolve to serve growing demands for low-value and cross-border payments,” Aranda and Zagone write.

Advancements in payment infrastructure have the potential to spur rapid and fundamental innovation throughout the entire financial ecosystem. With this technology, mobile money operators, banks, payments companies and governments are better equipped to create payment products that will have a profound impact on financial inclusion for the world’s poorest.